Doesn't a Major carrier (or more) NEED to die?

[slide33]

I'm no expert at Airline Industry Management (or much else), but with Delta and American slashing rates to compete, Continental needing to cut $500 Mil in pay, a Judge "tossing" a US Air mechanic contract - it seems the writing is on the wall.

Are some of these "Majors" just slowing their race to the grave? Captalism is supposed to eliminate the weak, right? It seems the Airlines will be something different entirely in 10 yrs. Is it destined for a "Regional" "Low Fare" industry?

What do you more seasoned folk see happening in the next several years? How long can the bleeding continue?

 

[minitour]

...Is it destined for a "Regional" "Low Fare" industry?...

Have no experience in the "industry" and I didn't stay at a Holiday Inn Express last night, nor did I save money by switching to Geiko, but here's my thoughts:

If AirTran, Southwest and others can make money right now (notice they aren't regionals), I don't see why it is headed toward a "regional" industry.

Maybe we have too many majors and all of the consumers are consuming the low cost tickets, leaving the higher cost airlines to die off a slow painful death...

But I really have no idea...

-mini

 

[EagleRJ]

The major airlines' business models are built around passengers who are willing to pay $8000 for a First Class ticket overseas- with a level of service to match.
Those days are gone for good, so the majors are trying to compete with the LCCs on ticket price.

That is a fight they cannot win. They need to wake up and realize that passengers might pay a little extra to get better service/food/points/comfort on a major versus boarding the "cattle car" at Southwest or Airtran.

Notice Southwest just announced service to Hawaii. If the LCCs continue to expand, the majors' last strength- network- will disappear, as will they.

 

[minitour]

...They need to wake up and realize that passengers might pay a little extra to get better service/food/points/comfort on a major versus boarding the "cattle car" at Southwest or Airtran....

I'd hardly call AirTran's 717s "cattle cars"...Business Class is niiiiiiiiiiice...

I'm willing to pay for the upgrade if it's available. Definitely worth it to me. I can sit in a nice big seat (good for my fat ass) and have a drink before the flight and I don't have to worry about smelly bubba spilling onto my side of the arm rest...

-mini

 

[Wiggums]

Notice Southwest just announced service to Hawaii.

I seriously doubt SW is going to serve HI in the next decade. What was announced today is that the code share between ATA and SWA was approved. However, expect this to be limited to flights out of MDW, and then only until SWA can move in for the kill on ATA.

 

[Daveman]

The major airlines' business models are built around passengers who are willing to pay $8000 for a First Class ticket overseas- with a level of service to match.
Those days are gone for good, so the majors are trying to compete with the LCCs on ticket price.
.

I see that. This is what I think may/might happen. (I could be way off, just a thought.)
LCC's focus on N.A., Majors (DL, AA, Cont'L) focus on international.
A very brief synopsis.

 

[Vector4fun]

Not trying to pick an arguement here, but I gotta comment on folks referring to SWA or another LCC as a "Cattle Car". After spending 30 minutes in line in the "round up" at the ticket counter, then being herded through the "squeeze chute" at the TSA checkpoint, then standing around the "feedlot" for forty five minutes, (a gate with 60 seats for a flight with 120 pax), I'm just dam happy to get on a flight and the heck outta the airport. I don't care what color the aircraft is painted. It ain't like DAL or AAL are serving me a meal any more.

(Anybody else remember when the "old" Frontier used to serve steak and lobster on certain flights? What was it they used to call 'em? "Petroleum Club" flights or somethin like that?)

I guess I'm missing something. I can't tell much difference between coach on a DAL 737 or AA MD-80, and a SWA seat, except the SWA FA's are generally in a better mood lately.

 

[RockyMnt1]

Frontier Food Flights

If there was any Frontier flight close by, I would go out of my way to use them just for the food. It was that good!! Those were the days...

 

[GogglesPisano]

Let the market work. Allow airlines in Chapter 11 180 days to get their house in order then kick them out of bankruptcy court and onto the streets of the market.

 

[EagleRJ]

I guess I'm missing something. I can't tell much difference between coach on a DAL 737 or AA MD-80, and a SWA seat, except the SWA FA's are generally in a better mood lately.

That's my point. The majors have allowed their service levels to sink to the level of- and even below- that of the LCCs. They're doing it in a vain attempt to become profitable, but all they're doing is losing customers who can no longer justify the premium.
If they intend to offer "just a seat- at the lowest possible price", then they have the wrong plan for profitability. The majors need to make major improvements in food and other onboard amenities, increase seat pitch, improve gate area comfort, make sure they have the best online service, and control their re-ticketing fees. Once they have a product that is clearly better than the LCCs, they can begin charging accordingly, and I think people will be happy to pay for the extras.

 

[semperfido]

Not trying to pick an arguement here, but I gotta comment on folks referring to SWA or another LCC as a "Cattle Car". After spending 30 minutes in line in the "round up" at the ticket counter, then being herded through the "squeeze chute" at the TSA checkpoint, then standing around the "feedlot" for forty five minutes, (a gate with 60 seats for a flight with 120 pax), I'm just dam happy to get on a flight and the heck outta the airport. I don't care what color the aircraft is painted. It ain't like DAL or AAL are serving me a meal anymore.

aint it the truth. the whole experience is a huge PITA. i for one can't wait for the pendulum to swing the other way.

 

[smellthejeta]

Have no experience in the "industry" and I didn't stay at a Holiday Inn Express last night, nor did I save money by switching to Geiko, but here's my thoughts:

If AirTran, Southwest and others can make money right now (notice they aren't regionals), I don't see why it is headed toward a "regional" industry.

Maybe we have too many majors and all of the consumers are consuming the low cost tickets, leaving the higher cost airlines to die off a slow painful death...

But I really have no idea...

-mini

What's a regional? IAH-YYZ on an EMB-145? LAX-IAH-IAD all on an EMB-145? How about Comair's route map out of CVG? Regionals were 200 mile flights on a turboprop. I'm not sure what to call flying across on the country on a "small jet" that does not have first class. Is it any different than a big jet without first class?

The LCC's are taking the high density routes and making money by making sure their planes go out full. They aren't flying to Canada, Europe, Asia, Hawaii, or in sparsely populated areas of the midwest and Rocky Mountains. I grew up in a part of the country that was 5 hours (drive time) from MSP and 6 hours from ORD. I was paying almost twice as much to go from there to DC than I pay now to go from LAX to DC or Chicago.

So yeah, the LCC's might be profitable, but if every airline were to only run high-density high-profit routes, a vast geographic area of this country would not have air service. I still don't believe we're comparing apples to apples when we compare WN, B6, FL and F9 to the rest of 'em.

 

[jtf]

Even the current Frontier kicks the crap out of the majors with multiple drink services, free meals (last time there was a choice between 3 different wrap sandwitches), happy FAs and seatback TV (although that was at an extra $5). The service and attitude on most major flights is crap and they really must turn that around if they want to give the consumer any reason to pay a little more for their ticket.

 

[ANSY31601]

You bring up an endless debatable question. I thought all of this aviation industry bleeding would have stopped a year or two ago!

However the government seems hell bent on continuing the problems by loaning money to airlines that were unprofitable and mismanaged 4 years ago. And the courts seem to void every contract they are presented with by corp. mgmt. What can any industry do at that rate?

I am not rooting against anybody but if two particular airlines were to finally; dissolve, Ch 7., go away, take a hike, say goodbye, this industry would recover in a matter of months. It also seems that F9, WN and FL do not share the same legacy cost as DAL, AAL, CAL, NWA, UAL, USA all share. Thus the situation parallels the steel industry reconsolidation.

I do think however think the major's business model is salvageable. Just not at the extremities it previously charged. WN, F9, JBU are awesome airlines but not everyone wants to fly them nor geographically can. It will all balance out.

But whatta I know? I'm just a pilot.

 

[movingviolation]

Look back at how much better everything got when Pan am and Eastern went under. Then when TWA got bought out that really helped....

Having one company or two go away isn't going to change anything. People have been saying that "if just one more goes under we'll be allright" for a long time. It never seems to get better in the long run.

That's why it's the greatest job in the world

 

[FN FAL]

I'm no expert at Airline Industry Management (or much else), but with Delta and American slashing rates to compete, Continental needing to cut $500 Mil in pay, a Judge "tossing" a US Air mechanic contract - it seems the writing is on the wall.

Are some of these "Majors" just slowing their race to the grave? Captalism is supposed to eliminate the weak, right? It seems the Airlines will be something different entirely in 10 yrs. Is it destined for a "Regional" "Low Fare" industry?

What do you more seasoned folk see happening in the next several years? How long can the bleeding continue?

If you look on the regionals section, there's some guys hoping a major fails so there can be third Northwest Airlink. I hope they get what they want. More low paying jobs with planes painted just like the bigger ones.

 

[Donsa320]

I don't know if many of you read "Aviation Week and Space Technology" magazine but they recently described the current majors situation with this little story.

Seems 2 hunters were out in the boonies. They became aware that a large bear was stalking them. They began to run. Running hard, one hunter says to the other " I don't think we can outrun that bear". The other hunter says; " You don't understand the situation, I only have to outrun you".

-DC

 

[:-)]

No an airline doesn't need to liquidate. If so, we would be seeing record low load factors instead of almost, if not, record high load factors. Obviously, the demand for travel exists.

What needs to happen is for the carriers to find a way to charge a price that allows profitability.

We need for the administration to tell the Justice Department to allow a one time "get out of jail free card" for price fixing. The carriers need to get together, and raise prices by a common amount. Increased gasoline prices haven't reduced the miles driven, and I don't think that a twenty, or so, buck increase in ticket prices will deter airline travel.

Calvin, with logic from Hobbes

 

[qmaster3]

The carriers need to get together, and raise prices by a common amount.

NO NO NO

 

[:-)]

NO NO NO

You got a better solution?

Do you have any idea how many dollars it takes to put a seat in the air?

What will you do once the employees all work for free?

At some point prices have to increase. Period, end of story.

You just can't finance $40 million aircraft with seats priced at $99 unless you are only serving select, high volume markets. SWA has made a good business out of serving select markets, but for every (within reason) American citizen to have access to airtravel, prices have to rise.

If you spoke from a consumers perspective, I can understand your "No No No", but the numbers just don't add up to continued access for all unless prices rise. I don't particularly care if it costs more to travel from Peoria to Yuma than it does to travel from Orlando to Baltimore, but I realize that for Peoria and Yuma to maintain service, prices must rise.

Hobbes

 

[DC8 Flyer]

No an airline doesn't need to liquidate. If so, we would be seeing record low load factors instead of almost, if not, record high load factors. Obviously, the demand for travel exists.

What needs to happen is for the carriers to find a way to charge a price that allows profitability.

We need for the administration to tell the Justice Department to allow a one time "get out of jail free card" for price fixing. The carriers need to get together, and raise prices by a common amount. Increased gasoline prices haven't reduced the miles driven, and I don't think that a twenty, or so, buck increase in ticket prices will deter airline travel.

Calvin, with logic from Hobbes

I agree with you on the fact that price per seat does need to go up, not much, but some. I have to disagree with on the record high load factors. Keep in mind I am no economist or have any business type training, but most articles and studies I have read say there are too many seats in the air. The whole air travel market is simply oversaturated. I know that seems funny to some who, like myself, seem to haul full loads of people everyday out of the same markets, but in other markets there are very low load factors.

The hard and sad truth, as I see it, is that one or more carriers needs to go away. I don't want to see it happen, but the really only other alternative is for one or more carriers to downsize enough to unsaturate the market and make flying profitable again.

I could be way out in left field on this too, if I had my way we would all fly DC8s with all glass carrying 100 people in exquisite first class and each of them paying 5000 bucks a ticket. But utopia isn't a place its big fat lie!

 

[:-)]

I agree with you on the fact that price per seat does need to go up, not much, but some. I have to disagree with on the record high load factors. Keep in mind I am no economist or have any business type training, but most articles and studies I have read say there are too many seats in the air.

According to the January 05 edition of AirTransportWorld, every major except American Eagle, showed over 71% load factor. The legacy carriers all show to fly with over 76% of their seats filled.

May I suggest that you don't pay too much attention to articles written by reporters who know so little about the industry. Most reporters take their info from company press releases and they eventually all end of reporting the same clap-trap. Doing so makes their job easier.

I maintain that the demand for air travel is strong, and that we just have to find a way to keep all of the carriers in line for price increases. I firmly believe that management is trying to hard to gain market share. To do so, they try to undercut the other guy. If they would only realize that the traffic would support both, we'd could all survive.

The oil companies compete, yet manage to stick together, why not airlines?

Of course, no carrier can unilaterally make a huge fare increase. The other carriers won't follow suit, but if all made a reasonable fare hike everyone would gain.

Hobbes